Bill Gross was once dubbed the “the biggest investor in the world.”
For decades, he managed the $292 billion Pimco Total Return Fund—up until last year, it was largest bond fund on the planet.
If you’re familiar with the complexity of evaluating bond investments—from calculating default risk to forecasting the effects of future interest rates—you’ll understand why Bill had such a challenging job…
And you’ll understand why so many investors choose to have their bonds managed by a professional.
Unfortunately, funds like Bill’s are only available for the public bond market—and with yields at all-time lows, even the pros haven’t had much to work with.
But now there’s a way for investors like you to have their private bond portfolios professionally managed—
And with yields in the private market approaching 10%, we thought you might be interested in learning more.
The Private Bond Market
Unlike the "Private Stock Market," where you invest in a private company and receive a stake of the business, today’s article is about the “Private Bond Market.”
The Private Bond Market is where regular people like us pool our capital and lend it to others.
Borrowers use our loans, typically $15,000 to $25,000 in size, to pay down high-interest credit cards, or to make a big purchase like a new car.
By cutting out the traditional bank as a middleman, borrowers pay lower interest rates, and lenders like us can earn higher yields—sometimes north of 10%.
What’s The “Catch”?
The catch is that you can’t just invest in a handful of bonds and expect to do well.
Because you’re lending to individuals, rather than a corporation or government, you need to be vigilant about managing your risk. And that means you need to build a big, diversified portfolio of bond holdings.
For example, according to Lending Club (NYSE: LC), the leading private bond marketplace, more than 99% of its investors had positive returns if they:
1. Built a portfolio that included 100 or more bonds, and
2. Had no single bond that accounted for more than 2.5% of their total investment.
To meet these criteria, given Lending Club’s $25 per note minimum, you’d need to invest $25 into at least 100 different notes.
But to get there, you’d need to sift through thousands of loans in order to select the ones that meet your criteria. That would take an enormous amount of time and effort.
On top of that, given the high returns from this new asset class, now you're competing with institutional investors like Wall Street banks and private equity funds.
These institutions are using expensive technology and experienced credit analysts to quickly grab all the “good” loans for themselves, leaving regular investors like you out in the cold.
So what can you do?
“Managed Account” for Private Bonds
One excellent option is to invest through what’s called a Managed Account…
You see, for a small fee, a new type of money management company will use its experience and proprietary technology to invest for you.
One such company is called NSR Invest.
NSR Invest makes investing in private bonds as easy and stress-free as handing your public bond portfolio to Bill Gross.
You can choose three different levels of risk:
“Conservative,” with target returns of 5%...
“Balanced,” with target returns of 7%...
And “Assertive,” with target returns of 9%.
NSR reports that current investors in its Assertive strategy are enjoying an 11.65% net yield.
Here are a few of the main benefits of using NSR Invest:
1. It was built by credit experts to provide higher rates of return with reduced risk.
2. The speed of its technology allows it to get access to the highest-quality loans right when they’re being released—so now you can compete with the big funds.
3. For accounts with under $20,000, it’s free. (For accounts with more than $20,000, it charges between .45% to .9%)
Go Pro
The one-year returns for Pimco’s Total Return Fund are about 1.5%.
With the private bond market offering annual returns in the range of 10%, you could potentially be beating Pimco’s returns by more than 600%.
To take your first step, check out professionally-managed accounts like NSR Invest.
Please note: Crowdability has no relationship with NSR Invest, or with any of the companies we write about. Crowdability is an independent provider of education, information and research on start-ups and alternative investments.
Best Regards,
Founder
Crowdability.com
